Archive for April, 2012

The Dow was able to overcome a week of uninspiring economic data to finish up 199 points, or 1.5% – the Dow’s second-largest weekly gain of 2012.  For the month of April, the index is flat, and for the year, up 8.3%.

In the US, strong corporate earnings (approximately 80% of the companies that have reported have announced to the upside) overshadowed a batch of weak economic data, including flat weekly unemployment filings and declines in consumer confidence, March new home sales, and March durable goods orders.  More surprising was the first quarter GDP number, which came in at 2.2%, below the estimate of 2.5% and fourth quarter 2011 3.0% reading.  In contrast to the GDP number, first quarter consumer spending increased 2.9% year-over-year.  Much of the increase was attributed to the warmer-than-average weather, creating concerns that the front-loading will lead to a downturn towards the end of the year.

In Europe, Spain remains in the crosshairs, as the country’s debt was downgraded by S&P late Thursday for the second time this year.  The downgrade was expected, however, and European stocks shrugged off the news to close Friday in the green.

Despite the rather flat start to the second quarter, our trust preferred portfolios, on the strength of strong bank earnings and the Fed’s low-interest-rate stance, continue to return almost 11%, on average, year-to-date through yesterday, Thursday, April 26, beating the Dow by almost 3%.

Next week, the economic reporting highlight will be the release of the April employment report on Friday.  Expect the number of jobs added to be below the January – March average of 250,000 and for the unemployment rate to remain at 8.2%.

Have a good weekend,

James Skjong

 

 

Strong corporate earnings propelled the Dow up 65 points on Friday, helping the index gain 180 points for the week, or 1.4%.  It was the Dow’s first weekly gain in three weeks.

Corporate earnings were in the spotlight and healthy reports from the likes of McDonalds, General Electric and Microsoft set the market’s tone.  With Apple, Amazon, Caterpillar and other blue chips announcing next week, corporate earnings will continue to be a key driver of market performance.  Across the pond in Europe, the first round of the French presidential election and continued action in Spain and Italy will be closely monitored.

Despite the uneven start to the second quarter, our trust preferred portfolios continue to return approximately 10%, on average, year-to-date through yesterday, Thursday, April 19, beating the Dow by over 3%.

Next week, economic releases of note include a consumer confidence reading and March existing home sales on Tuesday, initial jobless claims on Thursday and the advanced first-quarter GDP report on Friday.  Expect consumer confidence and existing home sales to decrease slightly, initial jobless claims to remain in the 380,000 range and for GDP to be near 2.5%.  Also of interest will be the Fed’s FOMC statement on Wednesday, though no surprises (i.e. an announcement of further stimulus) are expected.

Have a good weekend,

James Skjong

 

Better-than-expected first-quarter corporate earnings were not enough to overcome news of a slowing Chinese economy and as a result, the Dow fell 137 points on Friday, ending the week down 211 points, or 1.6%.  It was the Dow’s largest weekly decline so far this year.

The economic spotlight momentarily switched from Europe to China on Friday when the country announced first quarter GDP growth of 8.1%, below the 9%-plus expected number and down from 8.9% in the fourth quarter of 2011.  A slowdown in construction and weakness in exports led to the decline, heightening fears that an economic downturn in China could upset the global economy.  Meanwhile, in Spain, the cost of insuring Spanish debt against default (or the cost of credit default swaps) rose to an all-time high, confirming nervousness among investors.

In the U.S., although corporate earnings from the likes of Google, Alcoa, JP Morgan and Wells Fargo came in better-than-expected, an increase in initial jobless claims on Thursday, a slight uptick in inflation and a decrease in consumer confidence helped drag markets lower for the week.  Because economic headwinds still exist, speculation of further monetary easing/stimulation by the Fed continues.

Despite the bumpy start to the second quarter, our trust preferred portfolios continue to return approximately 10%, on average, year-to-date through yesterday, Thursday, April 12^th, beating the Dow by almost 4%.

Next week, economic releases of note include March retail sales data on Monday and March housing data on Tuesday and Friday.  Expect retail sales to increase from February and housing data to show little improvement from the prior month.

Have a good weekend,

James Skjong

 

It was a rough start to the second quarter of 2012 as three straight days of losses, ending in Thursday’s 15-point decline, cost the Dow 152 points, or 1.2%.  It was the Dow’s largest weekly decline so far this year.

European debt concerns were back in the spotlight, as worries related to Spain’s economy dragged markets downward.  A lackluster Spanish bond auction on Wednesday followed by comments from Spain’s Prime Minister that the economy is in “extreme difficulty” raised concerns that Spain may eventually need international aid.  This is particularly concerning as Spain is one of the Eurozone’s largest economies, much larger than Greece or Portugal.  As Spain continues to implement budget cuts and other growth-hampering (but necessary) austerity measures, the state of its economy will have to be closely monitored.

In the U.S., comments released by the Fed on Tuesday that another round of economic stimulus was not imminent tempered enthusiasm.  Not even a jobless claims number of 357,000 – the lowest number in four years – could reverse sentiment.  Jobless claims have now been under 400,000 for 24 straight weeks, with the peak being 667,000 in March of 2009.  Positive retail sales reports from major retailers helped limit losses on Thursday.

In the first quarter of 2012, our trust preferred portfolios returned almost 10%, on average, beating the Dow by approximately 2%, and other fixed-income measures such as the Barclays Aggregate Bond Index by almost 10% and the Dow Jones Corporate Bond Index by approximately 7%.  We expect trust preferreds to continue to produce compelling returns in this uncertain economic environment.

Tomorrow’s March employment report will set the tone for the market when trading resumes on Monday.  The number of jobs created in March is forecast to increase from February, dropping the unemployment rate from 8.3% to 8.2%.  Looking into next week, economic releases of note include initial jobless claims on Thursday and inflation data on Thursday and Friday.  Expect initial jobless claims to report in the 355,000 to 360,000 range and for inflation to remain in check.

In observance of Good Friday, stock markets and our offices will be closed tomorrow, Friday, April 6^th.

Have a good weekend,

James Skjong